Celebrating The Legacy of Jack Welch, Famed Past CEO of General Electric

Celebrating The Legacy of Jack Welch, Famed Past CEO of General Electric

General Electric is one of the top Fortune 500 companies in the world, and with a net worth of $147 billion, it ranked number 13 in the U.S. by gross revenue. But ask any top executives at this global, industry spanning organization who is their professional hero, one name will consistently come up, and that’s Jack Welch .

Jack has a long list of accomplishments while he was the chairman and CEO of General Electric between 1981 to 2001. The company’s value rose by a whopping 4,000%, and with a net worth of over USD750 million, he still holds the record of having the highest severance payment of $417 million.

But let's not get ahead of ourselves, and let's start with the origin story of how humble beginnings and a passionate drive to innovate, along with a guiding set of methodologies led Jack to become one of the greatest business leaders of our time.

The Origin of A Legend

Jack Welch was born in 1935 (yes, he’s over 80 years old now), to parents Grace, a homemaker, and John, a conductor for the Boston & Maine Railroad. Jack had been hard working since young. During the summer breaks when he was still in middle school, he worked as a golf caddie, shoe salesman, newspaper delivery boy, and drill press operator. Jack was active in sports too, playing baseball, football, and hockey, which he was the captain of.

As great as the business icon is known today, most wouldn’t have believed that Jack studied chemical engineering in the University of Massachusetts Amherst. And his interest wasn’t just a phase, because while he worked during his summer breaks at college, he turned down offers from several companies upon graduation, choosing instead to pursue his masters and Ph.D. in chemical engineering.

Early Years at General Electric

Upon graduation, he started as a junior chemical engineer at General Electric in 1960. Just a year at his job, Jack wanted to quit mainly because he was unhappy with the raise he was offered, and also the bureaucracy he observed at the company. He was persuaded to stay, with the promise that there would be changes happening. In 1963, he was almost fired when the factory under his management suffered from an explosion that blew off the roof of the facility. Luckily for him and the company, despite all that, Jack remained with the GE (General Electric).

And he quickly rose up the ranks too. By 1968, he was the Vice President and head of GE’s plastics division, which was contribution $26 million to the company at that time. Within a few years, he was promoted again to VP of GE’s metallurgical and chemical divisions, and in 1973, he was the Head of Strategic Planning, working out of the corporate HQ.

Jack Welch, CEO of General Electric

In 1981, Jack was made GE’s youngest chairman and CEO, and one of his biggest, boldest move was aggressive simplification and consolidation. GE was an industry spanning company, with a presence in almost every business field. Welch set a leadership directive that if any of the subsidiaries were not the number 1 or 2 in their respective industries, it would be closed down or sold off. The directive initially scared everyone from employees to executives to investors. That level of streamlining was unheard off in the early 80s.

Of course, that move paid off, when GE’s market value grew from $12 billion to $280 billion, at the same time making over 600 acquisitions as the behemoth of industries shifted into emerging markets. Remembering his earlier days at GE that almost led him to leave the company, Jack implemented new cultural philosophies that focused on informality at the workplace, and allowed all employees to have small business experience while working in a large corporation. If you’ve ever heard the term “intrapreneurship”, Jack was definitely one of the first few who implemented it (some would say without bothering to coin the term!)

Many at the time would have said Jack led with an iron fist and could be scary at times. For one, he would make surprised and unexpected visits to the company’s plants and offices, to ensure that everything was in top-notch condition and quality even in his absence. He also made famous the “rank and yank” policies, or the 20-70-10 system. In short, it states that the top 20% of the workforce is the most productive, and the 70% is vital and should work adequately. The bottom 10% are regarded as non-producers and should be fired. It’s a strict but controversial performance management that was frown upon when it was first implemented, but it has resulted in a massive 28-fold increase in earnings, and a 5-fold increase in revenue, during Jack’s time as CEO of GE.

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Jack Welch & Six Sigma

In late 1995, Jack was one of the pioneer companies that adopted Six Sigma, which was first introduced by Bill Smith in Motorola about a decade ago at that time. Making it central to his business strategy at GE, Jack used the set of techniques and tools to further improve the processes across all the operations at the company.

In a way, Jack had been unconsciously implementing a few philosophies of Six Sigma in the past, which focuses on improving the quality of the output of a process by identifying and removing the causes of defects, and at the same time, minimizing variability in manufacturing and business processes. Jack’s mission at that time was simple: he wanted to attain Six Sigma goals by 2000, which was a massive task for a company of GE’s size.

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He started by requiring all employees to undertake a 13-day, 100-hour training program in the methodologies of Six Sigma, and must complete at least a Six Sigma project by the end of 1998. Some of the training objectives were:

Definition or identification of the process

Measurement of process output

Analyzing process inputs for criticality

Improving process by modifying inputs

Controlling process by controlling the appropriate input

As a matter of fact, Six Sigma is such an intrinsic approach at GE that if you were to look at the company’s website, there is a section devoted to it. In their definition, “What is Six Sigma? First, what it is not. It is not a secret society, a slogan or a cliche. Six Sigma is a highly disciplined process that helps us focus on developing and delivering near-perfect products and services.” Six Sigma also made the term perfect quality tightly associated with any of GE’s products or services. With a strict objective of producing no more than 3.4 defects per million opportunities, you can imagine the high standards all practitioners of Six Sigma held the quality of their processes and their work again. In fact, flawless execution is the primary emphasis that leads to many of GE’s, and Jack’s success. Jack has also linked promotions and bonuses to quality improvement, and he was such a believer of the Six Sigma methodology that 40% of each top management’s bonuses was dependant on the successful implementation of Six Sigma goal, while a Green Belt became the minimum requirement for promotion for any employee. His commitment even took his previous time off from his leadership roles so that he could personally spend time during the training and review sessions, and went through weekly summary reports and monthly reviews with the Master Black Belt team. The outcome? Within just two years of implementation, Six Sigma’s effort contributed to $700 million in corporate benefits, and also resulting in the culture change that Jack had always wanted since his early days as a junior engineer. With the methodologies as a guiding principle, he was a major positive change in individual employees’ attitude towards quality, which significantly lowered service-call rates, and dramatically improved product reliability. It was no surprise that in 1999, Fortune magazine named Jack Welch as the “Manager of the Century”.

CONCLUSION

Jack Welch and GE were just one of the many companies, and their respective leaders, who had adopted the Six Sigma methodologies and enjoyed tremendous success. Ford Motors, Bank of America, Starwood Group, Starbucks, Netflix, Amazon, 3M and Boeing are just some of the big names that have successfully implemented Six Sigma. It is never too late to join the list of high profile companies which has benefited from this time-tested set of principles. Talk to one of our consultants to find out the best way to get your organization started on the right tracks to improve your business results dramatically.